Ford Motor Co., pressured by industry price wars, is sharply stepping up efforts to cut the cost of supplies used in its vehicles, while taking care not to reduce the quality of its products or their appeal to the consumer.

The No. 2 auto maker had set a goal to slash $700 in costs from each of its North American vehicles by 2005 in an effort to regain healthy profitability. That level of cost-cutting could potentially add $2.8 billion a year to Ford's profits, a chunk of which would likely flow to its customers in the...